"It took tremendous courage of conviction for Indian corporates like the Tatas to decide that protection would be inappropriate."July 21, 2016, 08:28 IST

By Cyrus P Mistry

I had just returned to India having completed my undergraduate degree in Britain when the Indian government announced major economic reforms in July 1991. A series of momentous changes would soon lead to the dismantling of the licence permit-quota raj. Indian corporates could now chart their own destiny with fewer curbs on their ambition.

Within a few years of the reforms having been initiated, India morphed from a scarcity economy into a market where, from automobiles to electronic goods and lifestyle products, a rich menu of options became available to the Indian consumer.

Not all Indian corporates welcomed the new environment of competition and openness.

They were already up against entrenched domestic companies, and would soon encounter international entities who had recognised the potential of the Indian market and were bringing their full complement of products and services to address the needs of a growing Indian middle class. In the face of such disruption, it took tremendous courage of conviction for Indian corporates like the Tatas to decide that protection would be inappropriate.

True to the Tata legacy of pioneering, Ratan Tata, elected Chairman of Tata Sons the same year that economic reforms were launched, made visionary strategic choices. His fundamental premise was that the Tatas should welcome open markets. Based on that premise, he encouraged Tata companies to benchmark their operations with their global peers, invest in innovation for the future, and compete with the best of breed across international markets.

The Tata group adopted the Tata Business Excellence Model (TBEM), based on the quality improvement framework developed for the Malcolm Baldrige National Quality Awards (first launched in the US as a means of responding to the quality challenge presented by Japan Inc in the 1980s).

This created capabilities within Tata companies to compete successfully in the Indian market, and thereafter grow in international markets with the confidence of being able to hold their own against their global peers. Thus, the first winner of the JRD Quality Values Award for performance within the TBEM framework, Tata Steel in 2000, went on to win the Deming Prize in 2008, and then the coveted Grand Deming Prize in 2012.

Focus on standards

The group also adopted a Code of Conduct, crafted to nurture and protect its reputation for observing the highest standards of corporate governance and ethical conduct. And in line with the group’s global mindset, a key clause in the Code required all Tata companies “to support the development and operation of competitive open markets and the liberalisation of trade and investment in each country and market in which we operate”.

The adherence of Tata companies to both the TBEM process and the Tata Code of Conduct was permanently enshrined in the Brand Equity and Business Promotion Agreement. Each Tata company subscribes to this agreement in order to secure the right to use the Tata brand. This has played an immense role in presenting to the world Tata products and services that stand for performance and trust. Alongside key initiatives in governance, brand promotion and business excellence, the Tata group quickly developed an understanding of the critical importance of innovation in order to successfully compete in the global economy.

This eventually led to the formation of the Tata Group Innovation Forum in 2007, and the celebration of the group’s pioneering instincts through annual Tata Innovista Awards.

The group’s recent disclosure of having crossed a milestone of 7,000 patent applications, a number that has doubled in just the last two years, reflects the rapid progress that we are making.

A decade’s solid performance in India after the launch of economic reforms set the Tatas on a path of carefully calibrated geographical expansion. Embracing the possibilities presented by inorganic growth, the group undertook several small acquisitions and then progressively larger acquisitions across multiple businesses, building the confidence to eventually undertake very large acquisitions like those of Corus and Jaguar Land Rover. To each of these, the group has brought a unique Tata approach of long-term value creation, balancing the needs of various stakeholders.

New opportunities

International acceptance of Tata products and services and the development of world-class capabilities and competencies also inspired the Tata group’s entry into several new sunrise industries, including defence and aerospace. A company like Tata Advanced Systems Ltd (TASL) has, thus, emerged as a leader in the aero-structures business, capable of being a partner to global aerospace majors like Lockheed Martin, Pilatus and RUAG Aviation.

And TASL’s joint venture with Sikorsky was able to establish a greenfield facility in Hyderabad in record time, which is today the single global source for assembly of the fuselage for the S-92 helicopters used for VIP transportation around the world.

It is also a matter of satisfaction for the Tata Group that the reforms process has eventually yielded amendments to regulations in the aviation sector that have allowed the Tatas to re-enter a space they pioneered in India. Conceptualised and led by Ratan Tata, the group was able, in 2013, to craft its reentry strategy in aviation with reputed partners, namely Air Asia in the low-cost carrier segment, and Singapore Airlines in the full-service carrier segment.

With the expansion of the domestic aviation sector, and the recent amendments in norms for international flights, the growth opportunities in this space appear very promising.

Key learnings that the Tatas have assimilated over the past 25 years include the understanding that innovation is a key differentiator in gaining market leadership; the critical importance of brands in establishing an emotional connect with customers; the necessity of having a long-term vision with the courage to back one’s instincts and take prudent risks in order to deliver substantial growth; and finally, the conviction that Indian companies can hold their own in competitive and open international markets.

From a turnover of about $6 billion in 1991-92, the Tata Group turnover crossed the threshold of $100 billion in 2012. Across diverse industries, from steel to soda ash, trucks to tea, IT to engineering services, and air conditioners to eye wear, Tata companies today enjoy leadership positions in India and the world.

With a powerful platform now in place, the Tata group is optimistic about the future. By 2030, our home market, India, will be the most populous country in the world and will likely have the highest growth rate among large economies, with the fastest pace of urbanisation. To address the rising aspirations of Indians, we will ride the wave of certain mega trends that will increasingly shape consumers’ lives across India and other global markets.

These include consumer preferences for premiumisation and more benefit-laden products and services, growing ecological consciousness and a focus on health and wellbeing, and the all pervasive influence of the digital economy. Through initiatives like the focus on renewable energy at Tata Power, the development of nutraceuticals by Tata Chemicals, the launch of our new omni-channel ecommerce initiative, Tata Cliq, and the development by Tata Consultancy Services of Ignio, the world’s first neural automation system for enterprise IT, we are already responding to these new trends. And to enhance the quality of our responses, we are partnering some of the world’s most reputed academic and research institutions.

The road ahead

As over 12 million young Indians come into the workplace each year, it is imperative for us to harness this force appropriately to reap the benefits of our demographic dividend. For India to remain a vibrant democracy with a market based economy, we need to ensure all our youth, irrespective of their socioeconomic background, are provided with the opportunity to perform to their true potential.

It is noteworthy that countries that have benefited from the demographic dividend have a large percentage of women in the workforce, which significantly increases the disposable income at the family unit level. This is as high as 60% in South-East Asia, whereas in India we are still at around the 25% mark.

India's success will be predicated on our ability to provide access to quality education for all, appropriate channeling of risk capital to create millions of entrepreneurs, significant improvement in our productivity in the agricultural sector, and an enabling regulatory, legal and institutional framework to encourage investment into the infrastructure sector as we urbanise in a way that minimises our environmental footprint.

It is with these objectives in mind that one of the Tata group's flagship corporate social responsibility (CSR) programmes, Tata STRIVE, is focused on skills development for Indian youth with an emphasis on employability, as well as a thrust towards entrepreneurship and community enterprise. And through our gender diversity programme, Tata LEAD, and our affirmative action programme, TAAP, we are committed to enhancing diversity in our workplaces.

The benefits of economic reforms have been many in the past 25 years. Hundreds of millions have been lifted out of poverty in India. However, the open and liberal architecture of the global economy is coming under increasing stress because of the challenges governments and businesses around the world face in balancing employment generation, technology adoption, and consumer benefit. Governments, in particular, need to resist the temptation to restrict free trade of goods, services and movement of people.

As a major beneficiary of liberal and open markets, and having witnessed the positive impact this has had on poverty alleviation and creation of more opportunities for India’s talented youth, the Tatas will always advocate continued reform towards more open and liberal regimes.

Isaac Newton had said, “If I have seen further, it is by standing on the shoulders of giants.” Today, as we celebrate 25 years of economic reform, we in the Tatas salute the vision of Ratan Tata, who recognised the need to embrace open markets and prepared us well to face the challenges and address the opportunities which the next 25 years will present.